For example, government agreed with the recommendation to ‘amend or introduce legislation to establish a banking and financial sector tribunal by 1 July 2017 to replace the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal’.

The government response also outlined that it agreed with the recommendation for the Australian Competition and Consumer Commission to ‘make recommendations to the Treasurer every six months to improve competition in the banking sector’.

This was backed by the Treasurer last week when he announced that the government would provide the ACCC with $13.2 million over four years to establish a dedicated unit to undertake regular in-depth inquiries into specific financial system competition issues from mid-2018. Further, the government has tasked the Productivity Commission to undertake a review of competition in the financial system from 1 July 2017.

Last week, the government said it was also looking to relax the legislative 15 per cent ownership cap for innovative new entrants, whether through the existing ministerial discretion or legislative change. This was part of the recommendation made by the economics committee to review the threshold to ‘determine if it poses an undue barrier to entry’.

The government also agreed to consider account switching issues further, once the New Payments Platform is in place, and to enable ASIC to set standards in relation to internal dispute resolution schemes, and collect information on the IDR activities of financial firms.

Things that the government ‘agreed in principle’ with covered several recommendations, including that ASIC establishes an annual public reporting regime for the wealth management industry (an enforcement review taskforce is currently consulting on a preliminary position that is ‘consistent, in principle’ with this recommendation) and that banks ‘be forced to provide open access to customer and small business data by July 2018’ (the government has said it will introduce an open banking regime in Australia).

One recommendation not accepted

There was one recommendation that the government did not support in its response, and that was that the major banks be required to ‘engage an independent third-party to undertake a full review of their risk management frameworks and make recommendations aimed at improving how the banks identify and respond to misconduct’.

These suggested reviews were asked to be completed by July 2017 and reported to ASIC, with the major banks to have implemented their recommendations by 31 December 2017.

In its response, government disagreed with this recommendation, stating: “We will not proceed with this recommendation in light of the existing risk management review requirements in place for prudentially-regulated entities – imposed by APRA's prudential standard CPS 220: Risk Management (CPS220).

“This standard requires entities to have a robust risk management framework in place; to perform of commission an annual audit of their framework; and to ensure that their framework is subject to comprehensive indecent review at least every three years.”

However, the committee had previously argued that the CPS 220 risk management process was “not sufficient in relation to misconduct”.

In the second report, the committee argued that the standard has a “broad focus on the material risks to a bank”. It argued that while these are “important for prudential reasons”, it emphasised that its focus was on the “ongoing and serious nature of misconduct by the banks towards their customers”.

It concluded that it “believes that an independent review of banks’ risk management frameworks aimed at improving how the banks identify and respond to misconduct is essential. The risks that can damage customers must be identified and reduced”.

Despite this, government argued in its response: “While CPS 220 does not explicitly require risk management frameworks to cover misconduct risks, all material risks relevant to the institution are to be covered.”